10 reasons Obama is failing 95 million investors

Commentary: Why his fat-cat bankers are destroying capitalism and democracy

ARROYO GRANDE, Calif. (MarketWatch) -- An open letter to President Obama: You are failing us. Many now question voting for you.

A year ago, millions of Americans -- investors, taxpayers, consumers, voters -- came together uplifted by the "audacity of hope," inspired by a vision of "change we can believe in," by "bold and specific ideas about how to fix our ailing economy and strengthen the middle class, make health care affordable for all, achieve energy independence, and keep America safe in a dangerous world."

"Yes, we can" was the rallying cheer. You were the game-changer after the Bush-Cheney fiasco. What happened? Today we just don't see, or expect to see, any real change we can believe in. America is more polarized than under Bush's GOP, dysfunctional as both parties tragically undermine our great nation.

There are many reasons future historians may rate your presidency average, or even a failure, at least based on the gap between the promise a year ago and the reality today, certainly for investors. But we also know that the future, seen through a broader historical lens, will reveal a natural cycle with you cast in the predictable final scene of a Shakespearean-style plot driven by fate, the same dramatic destiny of all great nations and civilizations. We know a dark conspiracy made up of Wall Street, corporate chief executives and the Forbes 400 controls Washington, limiting and manipulating you. So we know it's not all your fault -- for you are playing your role well in America's epic historical drama.

As Shakespeare put it: "All the world's a stage, and all the men and women merely players. They have their exits and their entrances." As this past year unfolded it became painfully obvious you are indeed playing a role in a historic drama, along with other leaders in a staged, life-cycle, endgame conspiracy that includes Presidents Reagan, Clinton and Bush, Fed Chairmen Greenspan and Bernanke, and Wall Street's bosses --Paulson and your fat-cat banker buddies. The final scene of this Shakespearean drama is playing out this very moment, with 10 improvisational plot points driving your character's role.

"Remember, democracy never lasts long. It soon wastes, exhausts, and murders itself. There never was a democracy yet that did not commit suicide." John Adams, a great American president, made that famous prediction at the beginning of our great nation.

And yet, paradoxically, when a democracy commits suicide, it also kills off the very capitalism that made it powerful, the economic system Adam Smith identified the same year our Declaration of Independence was signed. Today we are neither independent nor free; King George has been replaced by a far more powerful moneyed conspiracy that you sold out to last year.

2. Failing to sense the psychological impact of being an aging democracy

Our time is up, says Scottish historian Alexander Tytler, recently quoted by economist Marc Faber: "The average life span of the world's greatest civilizations has been 200 years." Then "once a society becomes successful it becomes arrogant, righteous, overconfident, corrupt, and decadent ... overspends ... costly wars ... wealth inequity and social tensions increase; and society enters a secular decline."

We're on suicide watch, acting out the final scenes President Adams predicted for democracy, as Wall Street murders capitalism.

Back in 2003, coincidental with the "greatest foreign policy blunder in American history," the Iraq war, Kevin Phillips, a political historian, published "Wealth and Democracy." Phillips warned: "Most great nations, at the peak of their economic power, become arrogant and wage great world wars at great cost, wasting vast resources, taking on huge debt, and ultimately burning themselves out." Three trillion wasted, says economist Joseph Stiglitz. And now, Mr. President, you're playing your role, along with Bush, Paulson, Bernanke and Congress, piling on an unsustainable $23.7 trillion in what is the greatest domestic blunder in American history.

4. Failing to lead with 'once-in-a-lifetime' systemic financial reforms

Former Fed vice-chair Alan Blinder recently wrote in The Journal: "When economists first heard Gekko's now-famous dictum, 'Greed is good,' they thought it a crude expression of Adam Smith's 'Invisible Hand' -- which is one of history's great ideas. But in Smith's vision, greed is socially beneficial only when properly harnessed and channeled," with incentives for risk-taking, honest competition, regulatory safeguards, and regulators who will actually enforce the rules. But "when these conditions fail to hold, greed is not good." Blinder fears "that a once-in-a-lifetime opportunity to build a sturdier and safer financial system is slipping away." No consumer protection, no mortgage clawbacks, no derivatives regulations, nothing. You are setting the stage for another, bigger meltdown, the "Great Depression 2," the last tragic act in this drama, dead ahead.

5. Failing to pick a cast of characters that could have changed history

Recently, John Kay of the Financial Times said: "Our banks are beyond the control of mere mortals." But it's not just banks: Our American government and economy is "beyond the control of mere mortals." Each president picks his own actors to play out this grand epic historical drama: 21 cabinet officers and 6,722 other senior bureaucrats.

Last year many voted for you fearing McCain might pick Phil Gramm as Treasury secretary. Unfortunately, Mr. President, your picks not only revived Reaganomics under the guise of Keynesian economics, you sidelined a real change-agent, Paul Volcker, and picked Paulson-clones like Geithner and Summers. But worse of all, you're reappointing Bernanke, a Greenspan clone, as Fed chairman, an economist who, as Taleb put it, "doesn't even know he doesn't understand how things work." And with that pick, you proved you also don't understand how things work. And yet forever true to the script, your decision fits perfectly in the final act captured by your predecessor, President Adams.

6. Failing to stand up to our 100 senatorial assassins and 261,000 lobbyists

Instead of leadership, you let Congress run the show, a strategy that may work in community organizing but in Washington reminds us of the old adage that "the inmates are running the prison." We now know why Adams used words like "murder" and "suicide" as the endgame in a democracy. Suicide was a theme in a third of Shakespeare's dramas: Romeo and Juliet, Brutus, Cassius, Othello, Lady Macbeth, Ophelia, Antony and Cleopatra. But Julius Caesar is the best comparison: Senators were Caesar's assassins -- a loyal friend even drew first blood. Today, any one of 100 self-interested senators can legally threaten to "assassinate" the entire nation. And you seem unwilling to stand up to their totally dysfunctional kamikaze mission.

Economist Peter Morici writes in the Baltimore Sun: "On banks, Obama talks tough, does little." Matt Taibbi is far more caustic in "Obama's Big Sellout," Mr. President: "A once-in-a-generation political talent" has "allowed his presidency to be hijacked. Instead of reining in Wall Street, Obama has allowed himself to be seduced by it ... pulled a bait-and-switch on us." And yet while it's so blatant and obvious, Wall Street gets away with it because your presidency has merged into a fat-cat bankers' conspiracy.

Wall Street bankers are stealing trillions: In "Not So Radical Reform," BusinessWeek says the "top five U.S. commercial banks ... were on track" earning at the rate of $70 billion "in 2009 trading unregulated derivative contracts." The Journal connects the dots: The same banks "allocated about $90 billion for overall compensation," with average bonuses of $500,000, ten times the income of most Americans. Yes, Wall Street looted that money from taxpayers as you turned a blind eye, Mr. President. One Journal commentator says "the government should make it clear that it will allow these institutions to fail." Except no one believes you have the guts or the will to do that, Mr. President. You are a Wall Street banker's dream. But you have failed America's 95 million investors and the consequences will be disastrous in the near future.

Before you took office Mr. President (and while Paulson was looting the American Treasury to save his old firm), Portfolio warned: For "every high flier who is chastened, another would-be mogul pops up elsewhere, convinced he's smart enough to game the system ... When things are very good, people take ridiculous risks, and then things come crashing down and the risk just moves somewhere else ... We don't know where it's going next, but someone will be making money somewhere." Why? Because "like a lethal virus, it seems, hubris never really disappears, it simply finds a new host." Yes, that deadly virus, that insatiable greed, mutates fast among Wall Street's fat-cat bankers.

10. Failing to see the ticking time-bomb scenario, the next big meltdown

"Bring Back Glass-Steagall," demands Journal columnist Thomas Frank, author of "The Wrecking Crew, How Republicans Rule." We hear the same message from Volcker, Stiglitz, McCain and others. But it'll merely delay the inevitable. The end-game is "never different," whether penned by Shakespeare, Adams, Tytler or Reinhart and Rogoff. As Frank says of the Financial Crisis Review Commission: Wall Street bankers will "skate away yet again by deflecting blame or mouthing pro forma mea culpas ... a sign that this inquiry, like so many other promises of reform since 9/15, is likely to leave Wall Street's status quo largely intact. That's the ticking-bomb scenario that truly imperils us all."

All the actors, cabinet officers, Fed chairmen, regulators, lobbyists are playing set roles in a well-known theater, waiting for their "entrance and exit" cues, "merely players" in a larger predestined historical drama re-written so many times, in the same repetitive plot. Like Shakespeare, economists Reinhart and Rogoff made clear in "This Time Is Different: Eight Centuries of Financial Folly," we are performing yet another revival of a 800-year-old history of self-destructive bull/bear, boom/bust cycles, with each ending in the same old Shakespearean-style final tragic act. For fact, you could break off Goldman's derivatives trading division from their commercial banking operations and I guarantee you their mega-bonus traders will find new ways to run Wall Street's gambling casino as fast as they were able to convert TARP billions into record bonuses in one year.

Epilogue: Midterms? Re-election? New GOP president 2012? All irrelevant!

The endgame script won't change. GOP-controlled House? 59 Dem senators? Romney? Palin as president? None of this matters, Mr. President. We're all "merely actors" in an epic drama well-known to Adams as well as Shakespeare. But don't get us wrong, we still do admire you. We know you'll honor your Nobel legacy, like Carter and Gore, after you leave office. But meanwhile, you are playing your role well in this tragic final act. Indeed, all of America's "merely actors" are right on cue with their "entrances and exits." Yes, even our 95 million investors are playing their designated roles too. In fact, it really doesn't matter much whether anyone goes to the voting booth, ever again, because the final scene has already been written ... by your predecessor, John Adams.

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